IA’s Pricing and Promotions Analysis identifies the trends and changes in pricing and promotions across various categories by tracking and analyzing publicly available data. The analysis provides insights about promotions at a category level and across different price points. It also uncovers the pricing strategies adopted by brands across categories as a response to the current market conditions.
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As Consumers become cautious about their spending habits, promotions seemed to have bottomed out:
Footwear and Apparel prices increased by 4.5% and 5% respectively in May 2022 over the previous year according to the Consumer Price Index data. Due to a significant increase in the cost of living, consumers have started feeling the pinch and this is beginning to reflect in lower consumer confidence. This may force them to spend more wisely, reduce their discretionary and impulse spends, drive migration to lower priced brands and aggressively pursue discounts. Considering the lower consumer confidence, we foresee promo intensity increasing in coming months.
Retailers and brands are trying to adapt different pricing and promotional strategies to keep their products affordable for their target consumers. These strategies vary by depth and breadth across each of the subcategories. Across Athleisure and Footwear, brands are maintaining an average discount of ~25-30% on around 30% of their product to ensure products remain affordable for consumers.
For Footwear, the average discount on men's footwear is 2% to 9% lower and the promo breadth is lower by 10% to 18% (except for boots).
In Athleisure, while the average discount is the same across menswear and women’s apparel, the promo breadth is higher for women’s clothing across all categories by 12% to 33%.
Brands are trying to make their merchandise affordable while maintaining their price perception
Amid tumbling consumer confidence and lower affordability, brands are offering on average ~10% deeper discounts on the lowest-priced products (Quartile 1) as compared to the highest-priced products (Quartile 4). Moreover, the breadth of the promotions is by ~20% higher for products in Quartile 1 as compared to products in Quartile 4 for Footwear.
The graphs below indicate the distribution of products across quartiles based on the selling price of the item in Q1, Q2, Q3 and Q4 respectively. The size of the bubble reflects the breadth of the promotions by products in the respective quartile.
A similar trend can be seen in Athleisure, where the average discount being offered is higher by ~3% on the lowest priced products (Quartile 1) than on the highest-priced products (Quartile 4), and the breadth of the promotions is higher by ~60% for products in Quartile 1 as compared to products in Quartile 4.
Brands are adopting different pricing/promotion strategies across key value categories to garner higher wallet share
For Footwear (sub category - Athletic Shoes) while the recommended price for Brand 2 is higher by ~21% than Brand 1, it offers a deeper average discount (5%) on a broader set of products (90% for Brand 2 vs ~30% for Brand 1). Brand 4 on the other hand is providing lower than average category discounts on all of its products in certain categories.
The size of the bubble in the below graphs indicates the breadth of the promotions for the brands in the respective categories.
In Athleisure, across categories, Brand 2 is providing deeper discounts on a broader range of its products as compared to other brands with a few exceptions. Conversely, Brand 4 is providing lower than average category discounts on all of its products in certain categories. Brand 5 does not offer discounts on any of their products.
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